Case-Shiller Tiers: Synchronized Dropping

Let’s check out the three price tiers for the Seattle area, as measured by Case-Shiller. Remember, Case-Shiller’s “Seattle” data is based on single-family home repeat sales in King, Pierce, and Snohomish counties.

First up is the straight graph of the index from January 2000 through August 2008.

Price drops continued in August at roughly the same pace for all three tiers. The low tier and mid tiers are still rewound to May 2006 with the high tier at June 2006 levels. The middle tier took the biggest hit in August, falling just under two points, or 1.1% in one month.

Here’s a chart of the year-over-year change in the index from August 2002 through August 2008.

After the low tier bounced down further than the other two tiers in post-peak months nine through eleven, everything has fallen back into roughly the same territory. The low tier still has the largest overall drop for every post-peak month since number nine. As predicted last month, the low tier has now lost over 10% from the peak.

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

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14 comments:

I guess except for The Tim, Seattle Bubble likes to sleep in. Perhaps you are all too busy watching CNBC or something. Is it correct to view the bottom tier as a leading indicator due to people attempting to “move up” yadda yadda yadda. Or is it more of a regional phenomona whereby lower tier houses tend to be clustered outside the city or in lower economic status neighborhoods so they are harder hit.

On another note, just a public shout out to Seattle Bubble for saving (and making) me untold amounts of money in this once in a lifetime housing event. This blog and the people who comment here have been consistently ahead of “the professionals” at every step of the way. As another aside, do you think most of the talking heads actual believe what they are saying/writing or is it just part of their job?

I think most talking heads are too busy drinking their own kool-aid to really see what’s happening. It’s like the “It can’t happen here” mantra proclaimed by those who are refusing to see the handwriting on the wall.

For the purpose of constructing the three tier indices, price breakpoints between low-tier and middle-tier properties and price breakpoints between middle-tier and upper-tier properties are computed using all sales for each period, so that there are the same number of sales, after accounting for exclusions, in each of the three tiers. The breakpoints are smoothed through time to eliminate seasonal and other transient variation. Each repeat sale pair is then allocated to one of the three tiers depending on first sale price, resulting in a repeat sales pairs data set divided into thirds.

Condos going for the high $200Ks is not a reasonable price. In 2004, this condo sold for $190K, which is more reasonable. If people would just list at prices close to the 2004 numbers, then I think people will start buying. With banks now having higher credit requirements, the recession, and the upcoming mortgage reform, the pool of people willing and able to buy has shrunk and will continue to shrink. I think it would be in the best interest of sellers and realtors to accept the fact that the pool of buyers has permanently shrunk and price accordingly.

Your House Prices graph shows the U.S. correcting dramatically faster than Japan and having ran up a lot higher. However, if you look at the 6 largest cities in Japan, you’ll notice they ran up and corrected at a rate more similar to the U.S. This makes me wonder if we are not in line for a little faster correction initially with the overall trend still remaining down for many years to come?

Joness –
I like your chart of the Japanese housing a bit better. The Economist version uses land prices, not housing – which is not totally representative. I pulled it more for the interest rate policy comparison than for the housing comparison.

If you have the data underneath that “6 largest cities” line it would be interesting to make our own comparative version